Financial Tips From CBS/The Nation: "Get a Loan From the Mafia."

By consumerist.comMarch 23, 2007

“[I]f you need money to pay your medical bills or get your car fixed, get a loan from the Mafia. You’ll get a lower interest rate and better terms.”

Ouch. Okay, the Mafia comment is sarcasm. But it’s in the context of an article on absurdly high fees levied by banks on (usually subprime) credit card holders. We’ve seen high rates and high fees before, but this example, cited in Congressional testimony, has to take some sort of prize for the most bullshit-per-dollar that banks have gotten away with:

…a young Navy sailor who opened a credit card account with First Premier Bank on November 21, 2006. The credit card had a $250 credit limit and a 9.9 percent APR for purchases. The same day that the sailor opened the account, he was assessed two fees — a “Program Fee” of $95 and an “Account Set-Up Fee” of $29. The next day (November 22), he was assessed a participation fee of $6. Three days later (November 24), he was assessed an annual fee of $48. When this young sailor received his first month bill, which had a closing date of Nov. 24, 2006, he had already accrued a balance of $178, without making a single purchase.

Does some blame fall on the sailor’s shoulders for signing up for such a horrendous card in the first place? Sure. But should banks legally be permitted to get away with this crap? — MARK ASHLEY

This sailor obviously signed up for one of those “bad credit” offers. I had to sign up for a similar deal while repairing mine… I believe one of the reasons why they charge so much is simply because their customers are considered *high risk*… If the sailor used the remaining $70 or so and decided not to make a single payment, they wouldn’t lose as much as much.

It’s just like those car title loan places…except not as greedy. *Those* places have a interest rate of around 500% or so…These companies simply take advantage of desperate people, but also give them a chance at the same time.

ahh! my good friends at first premier! home of the $300 sucker card! i used to get offers from them all the time (they focus on the 580-650 fico bracket). that “participation fee” is actually a monthly fee that nets them $72/year (plus interest). all in all, the fees on a $300 card total something like $293. now that’s predatory lending at its most efficient! “here’s a card to buy stuff. no wait, that will take you a few days. let’s max it out for you!”

READ THE TERMS PEOPLE!!!! this stuff has to be spelled out by law. it’s the tiny little piece of rice paper that usually falls on the floor when your busy oggling the “you’re pre-approved for up to $10,000!!!”

Sadly, this is not new. About ten years ago, I worked as a CSR for a bank that issued secured credit cards and “branded” credit cards for stores and catalogs.

Working there, we saw the same routine: $250 secured credit card, $49.95 annual fee charged immediately, and another $49.95 optional charge that people paid for “expedited processing and delivery”. The goal of such charges, of course, is to trick the borrower into going over their limit. After all, if you get your $250 limit card in the mail, and only charge $200, you’re being responsible with your credit, right?

this makes me sick to my stomach. i know the consumer has a responsiblity to know what the terms are, but these credit cards bury the important info in the fine print.

there was a great documentary on PBS a few months ago about the credit card industry. they interviewed a woman who teaches contract law (at Harvard?) who said that even SHE couldn’t understand the terms.

Ok, so we can get off of call-back lists. Is there a way to get off mailing lists for all of these credit card companies. I get at least 2 to 3 offers a week. My credit is bad, and I want to repair it. I simply shred these offers. But I would be happier to be able to get off of their mailing list.

It’s pretty clear what their terms are. See First Premier Bank Fees, Rates, Costs & Limitations. It includes this little gem: “If you are assigned the minimum credit limit of $250 your initial available credit will be $72.”

Woof. There are much better options, even for those with credit problems.

@Nottma: “The bank should have the right to do what they want as long as they inform him of these charges upfront.” i don’t know that i agree with that statement. i’m all for free enterprise, but come on. these fees are clearly designed to increase the APR above “usury rates”.

imho, fees should be assessed to offset specific costs. account setup fee $29? the cost of encoding, producing & shipping a credit card, in addition to the time spent by a data entry clerk entering info into a computer is ~$10. still, i can understand that fee. but what the hell is a program fee? what could that possibly offset? & then there’s an annual fee and a monthly participation fee. that’s double billing right there. i think annual fees are bullshit anyway, but charging two? come on.

if the lending industry can’t start doing a little self-policing, it’s time to get serious here.

the one issue everyone is forgetting about is that it is almost impossible to get things like, oh, store video rentals, a phone line, cable, net, anything without having a credit card as a “security.” Either that or have upwards of a thousand dollars ready to parcel out as security deposites on everything. And I’m not talking about rents, I’m talking about utilities and more.

guess what: the sailor is at fault. get over it. businesses should be allowed to get away with whatever consumers let them get away with. caveat emptor, bitches!

i highly doubt this guy was ‘fooled’ here. it may not be nice for him, but you know if someone offers to send $1 to happydude for eternal happyness, thats their own business… it’s not happydude’s fault.

you say “hould banks legally be permitted to get away with this crap” …. I could just as easily say “should people be legally permitted to be so stupid?” … same difference.

I got an offer from them once and foolishly took the offer. I ended up in the same situation as this sailor. I ended up getting the card canceled, and all of the fees waved. I called their customer service and stated that this was unacceptable and I would not settle for anything less.

The woman tried to offer me half of the fees removed. I questioned her hearing. I’ll never forget what she said to me and I quote “What did you expect for someone just starting to build credit?” That’s when I really lashed out at her stating that I was not infact starting to build credit and that the charges would be removed and the account closed.

After about 20 minutes of making my point (read verbally abusing some poor retention specialist)she told me the fees were reverse and the account would be closed. I demanded written confirmation and 3 weeks later I received a letter saying the account was closed and there as a zero balance. My credit reports show account closed and paid in full. They are persistent though.

I’m currently working to rebuild my credit and I get about 8-10 “pre-approved” credit card offers each month with terms like the card the sailor had. Most of the offers seem to come from Orchard Bank and First Premier. Usually, I open them just to read the fees and terms on the insert before they go in the shredder…

I have to tell you all the story of how these companies prey on all branches of the military because I don’t think people realize how often this happens.

It’s a shame that anybody anywhere gets taken advantage of, but the fact is, The military is targeted by them. You have young guys fresh out of high school usually who go straight to boot camp. From boot camp, they go to their technical schools wherever they might be.

I was in the Air Force and in 2001 when I arrived at my technical school, you had to earn the privelidge of leaving the base to go shopping or enjoy the town. This isn’t the fault of the military and probably prevents a lot of people from getting into serious trouble. BUT, when they go do finally go out on the town, they are inundated with offers of credit cards, pre-approved car loans, and pay day loans.

To this day I have lived in 3 countries, and 6 different states, not counting training courses attended for the military which would raise the tally to 9 states. The reason I tell you this is to illustrate that in all those travels, I have never seen so many “offers” for the above-mentioned scam credit “oppurtunities.”

It’s a shame that people could take advantage of what are basically kids, but that’s the way it is. I entered into the service a little later in life (23), so I was aware that these types of scams existed. A lot of guys and girls come to the military from small towns that are pretty much devoid of these types of scams, and know of credit cards only from their parents. Their parents probably wouldn’t know to inform their kids of the scam credit becuase they probably haven’t seen it. I saw a lot of young Airmen driving around in brand new, soon to be repossessed, Mustangs, and it pissed me off. I wasn’t mad at them, but at the institutions that would rape our military in this way.

BOTTOM LINE, don’t blame the sailor unless you know the whole story.

RAJIO, you should walk a mile in someone elses shoes before you start talking trash.